Conway: Ultimately, politics will have little to do with the industry's future. Greater forces are at work, and the numbers would seem to bear this conclusion out.
As reported by BIO, of the 370 or so public biotech companies, more than one-quarter have less than six months’ cash on hand and 40% have less than 12 months’ cash. Without a dramatic near-term turn in the markets, many of these companies are going to find themselves with limited degrees of freedom. Pragmatic companies are likely being proactive in accelerating discussions with potential acquirors. The shakeout is likely to be as pronounced, if not more so, in the private sector. We believe that there will be significant portfolio prioritizing and pruning, with venture investors ready to jettison all but the best of the lot. And this may be the optimistic scenario.
Masterson: Follow-on biologics are not generics. It is impossible to copy biologics perfectly, and at best, they are similar, hence in Europe they are called biosimilars. The FDA has handled only extremely small biologics like human-made insulin and human growth hormone as if they were conventional generics. They have barred other follow-on biologics from entering the market. This may change, but in the interest of safety and continued innovation, Congress must move forward with care.
Follow-on biologics must have their own distinct names because they could cause unexpected reactions. A biologic can combine several patents, one on the giant molecule itself and numerous others on the process for creating that molecule. Process patents are highly susceptible to challenge in court. Data exclusivity becomes very important for biologics.
President Obama and Democratic leaders have made the repealing of the Bush administration restrictions on embryonic stem cell research a priority. They have yet to determine if Obama should quickly put his stamp on the issue by way of presidential directive or if Congress should write a permanent policy into statute.
The debate is not academic. Democrats who oppose abortion say that such a legislative fight holds the potential to get the year off to a difficult beginning, even though the outcome is certain, given solid majorities in both the House and the Senate for expanded embryonic stem cell research.
Prevention will get a boost from drug makers and regulators in 2009. Pharmaceutical and biotechnology companies that can focus on preventive vaccines and immunizations will be able to capitalize on these public health trends. Pressure to spend more government funding on prevention could reduce availability of dollars for treating diseases.
During 2009, the health industry may prove to be a source of profitable growth during an economic malaise. As new players continue to enter the healthcare market and new technologies develop, the next frontier in healthcare could be hidden from view. In addition, heightened focus by regulators will need to be monitored carefully, as reducing healthcare costs are viewed as a way to stimulate the economy.
Mehta: Perpetual monopoly is incompatible with intellectual property rights. As tempting as such notions of perpetual monopoly are, which drive some industry managers’ short-sighted actions, biosimilars must become an integral part of the industry’s offerings—as is illustrated by the plans by Merck (MRK), Lilly (LLY), and other global pharma (likely to be joined by some of the mature biotech companies). All stakeholders have learned a great deal from the small molecule generics journey.
The only new factor is the need to characterize a biological when made at different manufacturing plants. Rapid progress on this front is under way, especially when one realizes that patented new biologics are usually made at multiple plants and the essential skills are transferrable, and increasingly, not patented.
In short, biosimilars or follow-on biologics for the first-generation biologics are likely to be widely used around the world by 2014 when the key patents expire, and most of the key monoclonal antibody patents expire around 2019.
Stem cell and such other next-frontier science should also advance noticeably over the next decade, with first-generation products nearing the market, if not already on the market. Here again, we should watch active R&D initiatives from around the world and not just from the industrialized nations. This is the journey for this century, not just this generation, and these innovations are poised to transform the way we live—not just the way medicine is practiced.
In the near term, the healthcare system risks falling victim to the bigger challenge of the turmoil in the financial industry, as many experts fear that there simply are not enough resources to do both. However, the Obama healthcare team certainly has the support and the goodwill to advance healthcare reform in parallel with other serious challenges we face, and we should be prepared for these fundamental changes sooner rather than later.
From evidence-based reimbursement to ensuring healthcare for everyone means that our industry must redouble its efforts to ensure that access to its products is available to all patients who need them, and it must be prepared to support the pricing versus the value that its products add.
These challenges of uniform access to cost-effective products and smarter development of the new science are the two fundamental challenges, and therefore, the two key opportunities for managements and investors alike.